How Does Google Make Money? How The Biggest Search Engine Earns Billions Every Year.

With millions upon millions of users browsing Google DAILY, this search engine has essentially become the king of all internet traffic. And with that tsunami that is it’s browsers looking for anything be it local businesses or just information on literally anything, this mass of traffic has paved the way for them to make billions every year.

But how exactly does this search engine make it’s money if people freely browse it without ever really paying anything? Enter the methods by which it makes it’s money…

The short answer is ads…but I’m going to break down what that really means…

Basically because Google has such an immense influx of traffic every day, a large portion of that traffic, even if it is a minority are people who are looking for something in the realm of services and/or products, while the rest are just seeking answers to questions and in all cases, these 3 groups of people can potentially become the targets of advertisers.

What this means is that if say for example out of 40 million people which is my personal rough estimate of the daily searches Google gets, a million of them are people who seek things like hair loss solutions, people and companies that offer hair loss solutions will advertise on that search engine to these million people.

They’ll offer services, hair loss products, ect…

But how exactly will they expose their services and products to them? Enter…

1) Adwords. The main branch where most of the profits are made.

By far the biggest money maker for this search engine is Adwords and for good reason. This network makes them billions and possibly makes up for over 90% of ALL the profits.

Take the same hair loss business offering “solutions”. If they sign up with adwords, offer a great site, log into Adwords and set up an advertising campaign where people who type things like “hair loss help” will see their ad, they can get great business almost instantly.

Add to it that for each click, the advertiser will pay Google a certain amount, and you basically get where the money comes from.

For each click the advertiser generates, they pay Google the amount that they decide they will pay. Now the amount set is determined by many factors such as the quality of the site, if it meets their TOS and other very important factors which I actually discuss here, but even though that article is more related to Bing Ads, the same type of parameters exist with Adwords.

As an advertiser, your goal is to get the biggest amount of clicks and pay the smallest amount per click and if you can correctly pitch yourself within adwords so that the network sees your site as a good quality site that helps people, you will stand to benefit from paying very little for each click you get.

Many people who are unaware and/or are unfamiliar with ways to pay less for clicks end up paying exponentially more than they should.

For example, you can get click costs down to $0.05-$0.10 if you’re good enough, but most people will never go lower than paying $1.00 a click. Compared to the smallest amount one can pay, that’s anywhere from 10-20x more! And I’ve seen advertisers pay WAY more than $1 per click.

Imagine the revenue generated through Adwords from someone who gets 1,000 clicks a day and pays $1 for each click. That’s a $1,000 from 1 person right there.

Multiply that by the great number of advertisers there that are scrambling to be shown through the adwords network and it’s not difficult to see why this search engine generates so much, so quickly…

Now one thing that is important to note is that for the GENERAL adwords program, it is not always easy to have an ad show up. Google’s policies have tightened a lot lately and in my experience, things like affiliate websites are very, very rarely seen nowadays.

You’ve got to have a GREAT website, a great service and/or product offered with massive informational benefits to the browser for this search engine to consider your page to be worthy to be featured on Adwords and displayed and if you’re not careful, you can risk being “suspended” from it like I was, twice.

No hard feelings though on my end even though I lost 6 figures in potential profits, I get most of my traffic from SEO which benefits me greatly since it’s free!

2) Adwords Express:

This is a bit more of a precise and/or segmented layer of the adwords system but it also generates the search engine a lot of money. Basically many businesses advertise themselves through this program and from my understanding (I have never used Adwords express so forgive me and correct me if I am wrong here…), when you are looking for a specific business, say a restaurant in your location or near you, you will get results from advertisers that are part of the Adwords express system.

Now a HUGE money maker comes from local businesses that advertise themselves here. And people love to use things like their mobile devices to find all sorts of things: Hardware stores, gyms, restaurants, ect…

Think about all those types of businesses people seek in specific locations, be it towns and cities and then think about all the businesses within all of potential locations (consider just how many different variations of local businesses there are and all the possible locations they can be in. It’s millions…) and then multiply the fact that many of these businesses are advertising on Google to help people find them.

Now add all those potential profits to the original Adwords formula. There’s another “few” billion right there…

3) The display network.

Alright now this one may confuse a lot of people because it gets into the topic of Adsense. The display network is also part of the Adwords network, but the way it works is like this:

People who use the display network on Google get to have their ads show up on websites that allow these ads to actually run, but they pay for the amount of “impressions” that their ads show for meaning if my display network ad appeared on 1,000 websites, that would be a 1,000 impressions and I’d pay for the amount of impressions I get.

Now appearing on a lot of websites may sound profitable to some, but in my experience it doesn’t really make that much money because most of the websites your ads will show on may not match the topic your website actually deals with and a lot of those website may not necessarily get a lot of traffic to begin with, so it’s just empty “wells” essentially.

Example: A hair loss ad appearing on a martial arts site. Not really relevant. Although Google does try to have it show up on the right types of websites.

But essentially the level of success in using the display network depends on which websites your ad appears on are most relevant and the amount of clicks they get as a result.

Either way, Google gets paid for this too and handsomely considering just how many people use this feature as well!

But what do the website owners that feature your display network ads get? They get paid too, by Google. And that is where the Adsense program comes into the picture.

If you’ve ever heard or run Adsense on your site, you know that once you get approved, you will get a code to put on your site and once it’s up and approved, ads will start showing. Well all those ads are advertisers who are using the display network of Google.

But understand that how much display network advertisers pay the search engine and how much the search engine pays the people who display these ads on their sites are 2 different numbers and there is a profit made by Google in the end, otherwise it would make no sense to run this program.

4) YouTube.

If you didn’t already know, Google owns YouTube, which one may consider a search engine of it’s own, although only exclusively in the video marketing department.

Whereas Google itself shows textual ads and search results, YouTube shows video ads and general video results and with the billion+ people who browse YouTube monthly, the same level of potential for advertisers to make money and as such make Google (YouTube) money also arises.

But YouTube is also a massive generator of billions in profits for the whole network every year. Just keep in mind that it’s mainly video ads that get placed there. Some are textual, but video marketing is best used on the YouTube network.

Either way, it is also part of the bigger ad network run by this search engine and is one of the main branches of profits generated by them.

Do you need to be an advertiser to make money with and through Google?

The short answer is no. Although Google is very open for new advertisers to market their websites and pay them for it, what they also offer is the ability for businesses or just personal websites to appear on the organic part of their search engine, and for free.

In fact, most of the clicks generated on thefirst page for the results the search engine shows have gone more so to the organic pages listed vs ads in many cases. In other words, it is more profitable to be organically listed on the first page than have an ad show on the first page since the former gets more clicks.

If you can reach the first page on this search engine and by that I mean organically, you can essentially guarantee yourself massive, free traffic (depending on the keyword you rank for) and make great money or at least just get a huge influx of visitors.

However, the trade off of being organically listed and listed very high (1st page) is something that is very hard to do for most people and often requires a lot of work in the department of content creation and giving Google time to trust your site enough and for those who have the money, the wait period is just not worth it, in which case, they look for faster ways to generate traffic, which is one or more of those 4 advertising avenues I listed above.

Personally from my experience, having used both Adwords and being organically listed very high for my website/s, I believe the best way to have your business thrive is to be listed in both areas, to take up the most “real estate” of search results for keywords masses of people look for.

However, as I have said, the advertising networks of this search engine can be VERY strict in it’s advertising policies and whose ads it allows to show up and if it doesn’t work for you, then trust me, being organically listed high and taking the time to do it is WELL worth it.

Whether you are an advertiser who seeks to get their ads clicks for little cost and/or someone who is seeking to organically rank high, one educational resource I recommend everyone learn from is Wealthy Affiliate.

Through them I have made many high ranking, free traffic generating websites and when it comes to paid advertising through Adwords and other big networks like Bing, I have also seen great profits despite paying for my ads to show.

Comments

My focus presently is learning all I can about SEO. I thought I would find it confusing and boring, but the more I learn the more I want to know. You mentioned the four avenues to rank high with Google: Adwords, Adwords Express, The Display Network and Youtube. My question is, after acquiring certain profficiency in SEO, which avenue should I focus on next? Perhaps they can be compatible with my continued SEO education? I wasn’t aware of Google’s mind-blowing numbers for their advertising efforts. Incredible. That just makes me more determined to learn much more about generating honest money through them. Thanks for this informative article!

Hi Luis, I suppose the answer depends on WHAT type of site you currently have. Right away, I will tell you to avoid the display network (which is adsense) because it pays little. I personally do not use it. That being said:

If your website is a local page, consider Google Adwords and Adwords Express, they are great for this.

If you have an affiliate page and it’s an online business, continue to do SEO, and consider Bing Ads, a platform outside Google as an extra way to get additional, relevant traffic.

Glad I found this article. I’m just starting out and using affiliate marketing. I’m trying to be patient as to when the traffic will come in. This reminds me to sign up with Bing and the other search engines. I realize I still have a lot to learn! Also, I have my own product that I sell on Amazon and need to figure out how to go about using adwords to sell this. It’s good to know that there is a potential that this could be a money pit if used correctly.

Hi Vandana, you really don’t need to worry about “signing up” with other search engines if you’re doing SEO. What I mean by this is that if you set up a WordPress website, your content will be picked up by all the major search engines, you don’t really need to do anything special to have them notice you.

However, when it comes to paid advertising, yes you will need to sign up with adwords and Bing ads if you wish to get more exposure.

That brings me to your product you mentioned. I’d like to know what it is so I can help steer in which direction you should go to sell it.

Whatever the product is, my advice would be the following:

1) Pick a niche audience that benefits from this product. If you are very well educated on the niche topic, if you haven’t aren’t done so, make a website that talks about this niche and sells that product.

2) If you’re going to use adwords and bing ads to sell your product, create an official page on your site that sells it, not an Amazon page, review the product on the page itself, then send paid traffic to that page using keywords which are MOST relevantly related to your product.

If the second option makes little sense, don’t worry about this yet, focus on the first point I made and that will carry over to the second point when you get more experience.

You do a good job of putting in to perspective the scale of googles advertising operation, the numbers are mind boggling!

I’m currently building my own website and creating content to go down the seo route, though I’m not ruling out paying for advertising further down the line, it’s just not an option for me in these early stages.

Great info. I’d like to ask you about your opinion on the future of the search engines. I mean, in what direction will they move? Will there be any serious competitor to Google (Bing, Yahoo or something completely new) anytime soon? What will SEO look like in, say, 5 years?

To answer that you simply have to look at what’s been happening to Google in the past 10 years and the answer is this:

Their profits and usage from browsers has been rising because they keep showing better and better results, meaning if someone looks for something on Google, there is a lot of confidence they’ll find what they’re looking for.

To make this better and better, Google has been refining and improving their search results constantly so the most recent way of ranking high I’ve provided you is basically a reflection of what Google wants.

And that’s what they’ve been focused on since their inception.

Now Google is still the king of all search engines because of what I just explained. Because their profits, usages and trust keeps rising means they’re doing the right thing/s to keep their business model thriving so when you ask where will SEO be in whatever amount of years, look no further than the direction Google’s been taking it for the past 10 years.

Bing and Yahoo simply cannot compete with it because they haven’t earned that same level of trust and if anything, their reputation will always be 1 step behind Google no matter how good they get. One can also argue that they will try to mimic the way Google gets things done to improve their numbers.

Either way, I do not see any new search engine or the existing ones getting in the way of this one, not for a long time, since they’ve keep the formula a winning one for so long. I also wrote about SEO and how it’ll look this year. Check that out. It should really help answer those questions even more so.

Google is one of the few brands that have become the word for an action. Just like Hoover? I do worry that they have become so large and dominant that it is not a healthy market anymore? Put Google and Amazon together and the rest of us are fight for scraps.

I think you’re mixing up the whole topic of competition, Google and popularity Pete. As far as I understand it, you’re not trying to make a website that is going to directly compete with Google or Amazon right? If you were, then you’d definitely be in trouble…

But as a website owner who is trying to set up a simple affiliate website, Google will become your best friend if you just market it right through the type of SEO it literally asks for, which is good quality content and so on.

Amazon and Google are just 2 incredible avenues through which you can create a gigantic income if you just know how to utilize one or both and Wealthy Affiliate not only helped me understand that, but showed me how to make the most of it.

Great post as always, It’s amazing to know the source of Google’s earning, I would also add one more source which is google photos as people can upload images to Google servers till 15 GB for free, But as a photographer, I always need extra storage so I bought storage from Google Photos, thanks for sharing this informative post.

As always a great read and very informational. Throughout this it sounded to me ( I am very green to all this ) like you are talking about a website that sells it’s own product. Not affiliate websites, right? If you have a website that is first informational, second affiliate, what would you recommend?

I’m not sure I understand your question Scott. I primarily make websites aimed at making money. When you have a niche topic and traffic, you can sell to them affiliate products and/or your own products.